AI Start-Ups Set to Crash and Burn, Warns Investor
Investors beware! Artificial intelligence (AI) start-ups are on the brink of collapse, with most destined to fail and leave you empty-handed, according to venture capitalist Vinod Khosla. Khosla, an early backer of OpenAI, issued the warning at a recent technology conference, comparing the hype around AI to last year’s cryptocurrency boom that saw many investors losing big. In fact, this year alone, venture capitalists have poured a staggering $21.5 billion into AI companies globally. But Khosla believes these investments will not pay off, as most people are simply jumping on the AI bandwagon without understanding the risks.
The “Greater Fool Theory” is in full swing, as people hope that others will invest at even higher valuations, essentially becoming the “greater fool” in the investment chain. But Khosla is not falling for it. He acknowledges that AI has the potential to revolutionize the world, taking on 80% of the workload in 80% of human roles over the next two decades. However, he warns that blindly throwing money at overvalued AI companies is a recipe for disaster.
OpenAI itself is seeking a valuation of around $86 billion, while rival AI companies like Anthropic, Cohere, and Inflection are also sailing high, with valuations in the billions. But Khosla is cautious about participating in later funding rounds if the expectations outweigh the true value of the businesses. He believes in investing in fundamentals, rather than momentum and hype.
Aside from financial concerns, Khosla also raises the alarm about the use of powerful AI technology in interfering with next year’s US presidential election. He warns of millions of bots controlled by nation states, particularly China, manipulating democracy and causing dysfunction. He applauds efforts by the Biden administration and Congress to restrict US capital and expertise from flowing to China in the AI, semiconductor, and quantum computing sectors.
Khosla urges the US to use all available resources to win the AI race against China, including importing researchers from Russia and attracting investment from the Middle East. He believes that AI tools developed at home could offer valuable services to people around the world and determine whether Western values or China’s dominance prevail.
So, are AI start-ups heading for a crash? Will this tech wave leave a trail of empty pockets? Share your thoughts and comments below! Stay informed with free updates by signing up for our Artificial intelligence myFT Digest delivered directly to your inbox. Comment below and let us know what you think!
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